Looking ahead

Independent asks U.S. to lift drilling restrictions off federal lands. Due to tight oil and gas supplies, state governors discussed the probability of an energy crisis. Thus, more supply-shortage and price-increase discussions involving industry and federal officials were held. The Financial Times reported that Anadarko Petroleum’s Chairman and CEO Robert Allison, Jr., contended that the government should lift a moratorium on drilling federal lands to increase petroleum supplies. He noted that the equivalent of a three-year supply of gas from offshore reserves is off-limit as a result of the moratorium. The Energy Department was warned that this winter could be the most expensive for natural gas users in 15 years. "The wholesale price of natural gas has doubled since April and tripled since last summer," said Alaska governor Tony Knowles. In 1998, President Clinton withdrew several areas from oil and gas leasing until 2012.

Shell makes huge investment in Nigerian oil sector. Despite major losses due to years of operational disruptions, Shell Petroleum Development (SPDC) invested $8 billion in natural gas and related products in Nigeria. The firm is expected to adhere to the federal government’s gas flaring restriction by or before 2010, said Donald Boham, external relations manager. He added that the firm plans to lay gas pipelines from Port Harcourt to Osisioma and Owerrinta in Abia State and may soon extend pipelines to Owerri. Shell has not witnessed any disruptions this year, due in part to the contributions of 13% gross revenues to oil-producing communities.

OPEC adjusts its 2000 world demand forecast. Within two months of the original forecast, OPEC slashed its 2000 world demand forecast by 180,000 bopd, to 75.9 million bopd. OPEC’s secretariat revised the global demand estimate for 2001, to 77.33 million bopd, also a reduction of 180,000 from its previous forecast. However, the "OPEC balance of supply and demand" – the amount of world demand that OPEC can meet – will increase to 27.5 million bopd in 2001 from 27.0 million bopd in 2000. Production from non-OPEC countries for 2000 was cut 200,000 bopd to 50.0 million and by 360,000 bopd in 2001 to 46.9 million.

Asian oil demand to increase to nearly 30% of world share. According to OPEC Secretary General Rilwanu Lukman, Asian demand for crude should be close to that percentage by 2020. This expected rise is drawing new energy investments, fueling a dramatic rebound from the region’s economic slump. At the Indonesian International Oil and Gas and Energy Conference in Jakarta, Lukman assured attendees that Asian demand was already 25% of the world usage. "These projections clearly warrant long-term investment commitment to the region," he said.

Widespread U.S. drilling increases tallied. According to a recent issue of The Original Drilling Permit Monthly – a Lehman Brothers publication – U.S. drilling permits increased for the fourth successive month in the 30 states monitored. After adjusting for a comparable number of filing days, drilling permits increased 7% in August from the July total. Total permits for the states increased 41%, compared to the same period last year. Due to the significant level of coalbed methane activity in Wyoming, that state was excluded from the tally, thus, lowering the monthly drilling increase to 4%, but still 59% year over year. Permits increased in California, Louisiana, Oklahoma, Texas and Wyoming, but decreased in New Mexico.

Arabian Prince discusses energy projects with U.S. majors. Before attending the summit in Caracas, Saudi Arabian Crown Prince Abdallah bin Abdelaziz met with U.S. majors in New York to discuss the kingdom’s large gas projects. ExxonMobil, Chevron, Texaco, Conoco, Phillips, Enron (with Occidental in a joint bid) and Marathon have been shortlisted for the Saudi projects, along with the European firms BP, Royal Dutch Shell, TotalFinaElf and Eni. The 12 majors have proposed to put more than $100 billion into the Saudi upstream gas and downstream oil sectors.

Iran claims U.S. is pressured to end sanctions. While defending his reform program, Iranian President Mohammad Khatami said that Washington is under heightened pressure to lift economic sanctions on Tehran. Khatami’s remarks came on the heels of an open letter from a coalition of U.S. businesses to President Clinton that challenged him to end sanctions. Obviously, the goal is to allow U.S. firms to participate in Iran’s lucrative oil sector. Foreign firms – France, Russia, Italy and others – are already engaged in business with the country, disregarding U.S. legislation concerning the possibility of fines for major investments in the petroleum sectors of Iran and Libya. However, the current oil-price situation magnifies the absence of U.S. firms as a glaring omission.

Russia may take drastic steps to maintain current output level. Russian gas monopoly Gazprom wants to increase domestic prices 30%, to maintain investments at a suitable level. This is a necessity to retain current production levels, claims the director of subsidiary Mezhregiongaz, Anatoly Khripunov. Gazprom must develop new fields to avoid a decrease in supplies; and, this year, it must invest about $4.5 billion (double its 1999 total investment) to sustain production levels, said Khripunov. Due to unreliable client payments and government-regulated prices, the gas giant has asked the federal energy commission to approve a boost in rates.